Get to know the Follow Trend Trading Style on Forex
In general trading in the forex market there are various types of strategies and trading methods that we can use. In choosing a trading method, a trader must adjust it to his abilities and personality. This is because if you use the wrong trading method incorrectly it can affect your trading activities. The trading strategy itself has many types such as breakout trading, hedge trading, etc. But in this discussion we will discuss trading follow trends. The following is the discussion.
Follow means to follow or can also mean following, chasing and adhering.Likewise in the world of trading follow means to follow the trend that is happening. So the adherents of this trading style are just looking for trading opportunities in one particular direction. Follow trend has the characteristic of opening an order in the form of pending stop. Traders who follow follow trends tend to focus on movements that are becoming trending. Indicators that are widely used by traders who follow the trend are:
Moving averages are very practical if used in the follow trend method. Moreover, you only need 2 simple moving average periods of 200 and 50 only. This MA is very effective in identifying a good price reversal when the trend is strengthening or weakening. Besides that, MA can also be used as a signal of open position and close position. To identify price reversals, you can say it’s quite easy and simple.If moving average 50 cuts the average moving 200 from above, it means that the trend has turned into a sell trend. Likewise, if the MA 50 cuts the 200 MA from below it means that the trend is turning into a buy trend.
This one indicator serves to describe the points of stop prices and reversal of prices and direction of the trend. So it can be easier for you to use the follow trend strategy. Moreover, this parabolic SAR indicator allows traders to trade all the time.
Bollinger bands are indicators that can help you to measure market votality and estimate the range or range of price movements. This indicator consists of three lines that move following price movements. The three lines in question are upper band, middle band and lower band. The point is this one indicator helps you to recognize whether the market is crowded or just being quiet, when Bollinger bands are widening meaning the market is crowded, while when Bollinger bands narrow and tend to move flat means the market is quiet. You don’t need to learn Bollinger band calculations that involve high-level math calculations. You simply learn the use of Bollinger bands practically so that you can use them to read opportunities from price movements. By being able to read the opportunities for price movements you can decide when the right time to open a position follows the trend
This trading method is arguably the most popular method and most widely used by traders, because this strategy is easier because it only follows the trend. In general, trend follower users assume that the trend tends to continue which makes them always open positions according to the direction of the trend that has been formed beforehand. They assume that there are no prices that are too low or too high because prices only move in one direction continuously.
The first step to follow this trend is to look at price movements in larger time frames such as D1 / daily or more. Furthermore, determine the direction of the trend that occurs by analyzing at a smaller time frame such as H4 / 4 hours can also be below such as H1, M30, M15. After that, just wait for opportunities for trading transactions that are in line with the trends that occur in D1 or more. The point is to determine the direction of the trend using a larger time frame, then use a small time frame to wait for the moment and make a transaction.
The advantage of using the trend following method is that statistically probability can get greater profit compared to other trading methods. This is because in general the trend tends to continue. While the weaknesses of the follow trend method, including this one trading strategy cannot catch a new trend early if there is a trend change at any time. This makes the following traders trapped in transactions amidst the trend. In the end, even if the trend is over it can increase the risk of loss. The solution that can be used to overcome the shortcomings of this strategy is to use good money management and limit your risk of loss. In addition, never do the following trend strategy without using stop loss . The reason is that the trend can change at any time.